What’s in store for Pilbara, MinRes, IGO and Liontown? Latest lithium market developments
It’s been a spectacular rally and ASX lithium stocks are loving it! But can it continue? We check the latest lithium market developments.
The lithium market has rarely been short of drama, but the latest price spike has unfolded with unusual speed and complexity. What began with a spark of anti-involution sentiment in China (i.e., a government campaign against excessive, unproductive competition) quickly shifted into speculation about the possible closure of China’s marginal lepidolite mines. These operations, responsible for much of the additional lithium supply that has weighed on prices over the past two and a half years, have long been seen as the weak link (and swing factor) in the global lithium supply chain.
The anti-involution narrative itself was arguably linked to the authorities’ desire to avoid a repeat of the last lithium price spiral, when a preceding price spike triggered unbridled supply expansion – feeding a race to the bottom in terms of lithium prices. That race sapped industry profitability and its long-term viability (sound familiar? 🤔). But what began as speculation has since become reality, with news emerging earlier this month that CATL’s large lepidolite mine in Jiangxi has been suspended under regulatory scrutiny. Analysts warn that more mines could follow.
In parallel, new information is trickling through about how both producers and consumers of lithium salts are responding to the recent sudden surge in prices. Their behaviour will go a long way in shaping the future path of lithium minerals pricing.
For now, futures markets offer one of the clearest windows into the tug-of-war between bullish supply-side risks and bearish demand resistance. Let’s investigate the latest developments in the lithium market to determine where prices are likely headed next.
Episode 1: A New Hope
Lithium carbonate prices have staged a remarkable rebound after a brutal decline from their 2022 peak, during which prices for key lithium benchmarks had dwindled by 90% by June's trough. That withering decline hammered the profitability of ASX-listed producers, and their share prices alike.
That pain has now given way to cautious optimism. As major broker UBS recently put it, “We now see that the worst of the lithium price downcycle has passed,” (“Lithium - Upgrade price outlook on China scrutiny & halts”, UBS, 11 August 2025), and Canaccord Genuity had this to say, “Pricing bottom is in, now where can it go?… With our analysis now suggesting demand growth outstripping supply growth… we expect to see some level of continuation in the recent price rally.” (“Lithium | Demand's in charge now”, Canaccord Genuity, 25 July 2025). It's also palpable among lithium’s social media faithful: Hope has returned! 🥳
The key drivers of the current rally are:
- Regulatory scrutiny in China: CATL’s Jiangxi lepidolite mine was suspended, with up to eight more mines flagged as at risk of shutdown.
- Bullish sentiment in futures markets: The Guangzhou Futures Exchange (GFEX) has repriced sharply higher in recent weeks, signalling a shift in expectations.
- Psychological price levels breached: Domestic Chinese spot prices have climbed back above ¥80,000/t (from a low of ¥60,400/t), reigniting speculative flows (nothing drives the prices of Chinese stocks and futures to rise more than rising prices!).
The question now is whether this is the start of a new lithium bull market – or merely a part-fundamentals-part speculative blip before the broader downtrend resumes?
Start of a new lithium bull market, or a false dawn?
Respected Australian broking and research house Barrenjoey’s latest commentary captures the mood on the ground:
Earlier in the week, trades were limited as downstream consumers hesitated to accept the surge in lithium carbonate prices, which rose above ¥80,000/t. Two Chinese traders indicated that selling spot lithium carbonate has become very challenging, despite the price increases. A Chinese consumer noted that cathode material makers have not yet accepted the fact that prices have risen above ¥80,000/t. However, they are concerned about the possibility of further price increases, which may lead lithium salt plants to hedge their positions, potentially delivering to the Guangzhou Futures Exchange and thereby restricting supply to cathode makers.
And this…
The higher values heard in the Asian seaborne battery-grade lithium market during the week were not widely accepted in Europe, where demand remained muted, and no fresh offers, bids or trades were indicated…
(“B* Resources Daily”, Barrenjoey, 18 August 2025)
Um, translation please Carl? I hear you ask…🧐
I reckon it goes like this: The foundation of the current lithium rally is potentially fragile. Prices are up, but buyers are not yet accepting higher prices and committing at scale. Traders report that selling spot lithium carbonate has become “very challenging” despite rising prices. Cathode makers have baulked at paying above ¥80,000/t, even as they admit concern about further increases. I suggest the lithium market is delicately poised…⚖️
Why prices could fall back:
- Sticker shock: After two years of falling prices, cathode producers (i.e., consumers) are reluctant to lock in new inventory at levels they see as inflated. They may instead choose to run down existing inventories, which have continued to build through 2025 and remain at historically high levels.
- Thin liquidity: The seaborne market has seen few, if any, trades concluded despite higher offers ("The seaborne market has no deals, but prices are up." “B* Resources Daily”, Barrenjoey, 18 August 2025)
- Hope for relief: Many lithium minerals consumers expect that the current rally could prove temporary if it results in more supply coming back online.
Why prices could climb further:
- Supply tightness: With CATL’s mine offline and regulatory risks looming over others, short term physical availability may shrink further.
- Futures hedging: Salt plants may choose to deliver into GFEX contracts rather than supplying cathode makers, further tightening spot liquidity (i.e., diverting supply away from cathode producers).
- Fear of being caught short: If cathode producers sense that supply direct from producers is drying up, they may be forced into panic restocking, fuelling a squeeze.
- Chinese speculators: Likely one of the biggest contributors to the recent rally, and likely to be a major factor going forward – nothing works speculators into a frenzy more than rising prices… further price rises can become self-fulfilling!
This tug-of-war is unresolved. The answer, as Barrenjoey hints, may lie in the futures market, which is increasingly seen as the bellwether for pricing expectations.
Looking to the future(s)
Clearly, recent developments in the lithium market have left sentiment delicately poised. To get a better understanding of how both producers and consumers are responding, it’s worth looking at the futures market. Before delving into the implications of the pricing of the benchmark lithium contract on GFEX, it’s worth briefly recapping what futures are and why they matter:
- Futures contracts are agreements to buy or sell a commodity at a set price on a set date in the future.
- Commodity producers use them to hedge revenue, locking in future selling prices.
- Commodity consumers use them to hedge costs, ensuring predictable input prices.
Since its introduction in July 2023, GFEX’s lithium carbonate futures contract has become the key reference point for pricing in the global lithium market. Supply and demand in this market is typically expressed in Lithium Carbonate Equivalent (LCE) terms, which makes GFEX contract pricing particularly relevant.
The current benchmark month is November, which closed ¥86,900/t on Friday (chart above). But if we look through the “curve” of various months’ contracts pricing on GFEX, we can glean some important insights as to where both producers and consumers see the lithium carbonate price heading next (or at least out to the latest August 2026 contract).
Note: I collate the technical analysis chart above and the two futures forward curve charts below manually each day from GFEX data – they are not publicly available for free anywhere else! 👍
CHART 1: GFEX LITHIUM CARBONATE FUTURES FORWARD CURVE VS SPOT - 15 AUG VS 20 JUN
Chart 1: GFEX Lithium Carbonate Futures Forward Curve vs Spot (click here for full size image)
Observations:
- On 15 August, spot lithium carbonate was above ¥83,000/t, compared with the 20 June bear-market low near ¥60,000/t – the lowest close in the last bear market cycle. The entire curve has effectively shifted upward by more than ¥20,000/t since June.
- The forward curve now sits in mild contango (i.e., futures above spot), with near-term futures (late 2025–2026) priced ~¥2,000–3,000/t above spot. In June, the forward curve was below the spot price (i.e., backwardation), reflecting deep market pessimism and expectations that prices would remain suppressed.
- The current curve shows a slight downward slope, with longer-dated contracts softening compared with near-term peaks.
Implications:
- The market appears to be treating ¥80,000/t as a new floor, signalling a structural re-pricing of supply-demand expectations.
- Mild contango with downward slope indicates near-term contracts are the most expensive, implying the market is potentially in a state of “short-term squeeze” (i.e., traders were caught unawares by the recent sudden spike, many likely short – therefore having little choice but to pay up to close out these positions).
- The downward slope implies the market sees diminishing urgency to purchase product at higher near-term prices, potentially also some scepticism about the durability of high prices, reflecting expectations that supply growth may reassert itself beyond the near term.
CHART 2: GFEX LITHIUM CARBONATE FUTURES FORWARD CURVE
Chart 2: GFEX Forward Curve Evolution Over Time (click here for full size image)
Observations:
- The forward curve has shifted higher since June, moving from ~¥65,000/t to above ¥83,000/t across contracts.
- The June curve had a gentle upward slope, suggesting expectations of gradual recovery from depressed levels.
- Despite the higher base, the current curve slopes downward – near-term contracts price highest, while further maturities soften. This is still technically contango, but with a bearish tilt over the medium term.
Implications:
- The sharp repricing signals stronger conviction across market participants for a higher near-term floor in the lithium price.
- The slope inversion (i.e., upward in June → downward in August) suggests a change in sentiment: In June, the market was attuned to the possibility of a recovery; yet now, from a higher base, it sees risks of moderation.
- The downward slope implies traders see current supply risks as front-loaded (supply disruptions, short squeeze) rather than long-term/structural – Market participants are effectively pricing in a squeeze now, but expect some relief later, showing belief in stability rather than runaway prices.
Conclusion: The Law of Price will prevail
The lithium market is clearly in flux. After a shock of this magnitude, it's no surprise that pricing remains volatile, and sentiment divided. With so many moving parts – from regulatory action to buyer restocking cycles and speculative flows – anything can happen.
Yet the law of price is immutable: Demand + Supply = Price. For there to be a sustained recovery in lithium carbonate, there must be a period of sustained excess demand. For much of the last two years, the equation was brutally simple: Supply > Demand = Price ⬇️.
Demand itself has not been the problem – the electric vehicle (EV) and battery energy storage system (BESS) boom has continued to grow the demand for lithium minerals at a steady rate. Rather, it has been the supply glut that crushed margins and producer share prices alike. Until this imbalance is addressed, no recovery can hold.
So then, do recent developments support this resolution? Possibly. The suspension of CATL’s mine and the risk of further shutdowns mark a credible tightening on the supply side. But it may also prove temporary if higher prices embolden other suppliers to ramp up production again.
Most major research houses believe the EV demand story will eventually push the market into sustained deficit by 2027–28. So far, none have materially changed that timing despite the recent volatility.
In the meantime, the best guide to the market’s expectations lies in GFEX futures pricing. The forward curve tells us that traders see short-term squeezes, but not yet a structural bull market. Prices may remain volatile and elevated in the near term, but scepticism about their durability remains high.
For investors in ASX lithium stocks, the "New Hope" is real – and for ASX-listed producers, it's true that the sharp repricing of the so-called “lithium price floor” back to ~¥80,000/t represents a margin lifeline. Recent share price moves reflect this.
Whether recent developments mark the beginning of another bull market or are just a false dawn, however, depend on evolving supply disruptions and whether reluctant consumers are ultimately forced to capitulate. Futures markets will be the place to watch for the answer, and so far they’re gently leaning towards only modest gains through most of 2026.
This article first appeared on Market Index on Monday, 18 August 2025.
Never miss an update
Enjoy this wire? Hit the ‘like’ button to let us know.
Stay up to date with my current content by
following me below and you’ll be notified every time I post a wire
Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.
........
Investing is risky. Inevitably you will endure losses. If you can't cope with losing, don't invest.
Never miss an update
Get the latest insights from me in your inbox when they’re published.
5 topics
17 stocks mentioned
Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl...
Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl...
Comments
Comments
Sign In or Join Free to comment